Thanks in advance for any assistance you all provide.
First off I will admit I am clueless when it comes to money/investing/401k/anything to do with retirement planning. I am in my early thirties and I work as an automation technician in the steel industry. My income after taxes is probably around 85K. I am not married, no kids, no house. I currently rent as just recently transitioned from the military. Including my car loan and CC's I have about 28K in debt 24 on the car and 4 on the cards. The company I work for was just bought out in September, and the new company policies take affect beginning 1/1/15. After my 6 month probationary period i enrolled in my companies 401K through fidelity, they offer a 6% match and I currently have just shy of 27K that is fully vested, I also have a traditional IRA that has $3500 in it because I wasnt sure what to do when i started. Like I mentioned above I have no idea what I am doing and chose to put all my investment from my companies policy into FFKHX (ticker). The new company offers RSU's, profit sharing, and they are switching the 401k service provider to New York Life. Here is a quote from my new benefit package "Profit sharing is based on the company’s calendar year pre-tax profit. Part of the profit
sharing award is contributed to eligible employees’ 401(k) account, while part is generally paid in cash." So they don't offer a percentage match but that may be made up with the profit sharing contributions, should I do something with the Fidelity 401K and start fresh with the NYL one or should I roll it over? My current employment is <2 years so I have 4 more till i'm fully vested with the new company. Of the contributions that my company will make for profit sharing only 50% of that is under my control, the companies investment committee decides where the other 50% is invested. I know this is a lot and there are tons of things to do and options to take advantage of but as i mentioned i am clueless about this stuff. I want to be able to retire by the time I am 60 and like most people i would like to be comfortable in retirement. I will in the next 5 years be buying a house so i know that will throw another wrinkle into these plans but for now can someone please share some wisdom with me. Thanks for any assistance and feel free to be brutally honest if i am being and idiot please tell me. I have thick skin.

Tue Nov 11, 2014 7:51 am

PubliusPreferred Member

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First, happy Veteran's Day and thank you for your service.

The target date fund, FFKHX, is a pretty good choice for you. It is a no-brainer kind of way of investing. The fund is primarily equities at this point and will transition to more conservative investments as you near retirement age (assumed to be 2050 in that fund). It is returning 6% on the year so far, which lags behind the S&P500 a little bit, but you don't need to feel panicked about doing something about this fund -- its "good enough" for the short term.

Is there a comparable target date offering from New York Life? You could stay in the same sort of allocation by choosing that fund in your new 401k. If there are good choices with NYL, you could roll it over to the new 401k. If not, you could just roll it into a traditional IRA with Fidelity if the new company allows that -- it depends on their rules, they may require that you put it in the new 401k.

If the 50% of the profit sharing is going to go into the stock of the company, you want to look at what limitations you have on selling those shares and getting into another fund. The reason for this is having a significant amount of your retirement funds in one stock is inherently risky and it is compounded if you also work for that company. If the company pulls an Enron and is out of business overnight you are out of a job and out a significant portion of your retirement savings.

If saving for a house is in your future, you want to put some of your savings in a non-retirement vehicle. So, keep up the investments in the 401k, but divert additional funds to a savings account and/or a brokerage account.

Tue Nov 11, 2014 2:48 pm

blixetPreferred Member

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For being clueless, it doesn't look too crazy, and at least you don't seem to have a negative net worth.

What's the deal on the debt? 4 credit cards w/$4K charged up on them is a little concerning. Are you living beyond your means and using debt to finance your life style? Debt is not usually a financial problem, it is a behavioral problem.

The basic rule to financial independence is LBYM. You have to live below your means. Pay the cards off and don't carry a balance over from one month to the next. You should have a contingency/emergency fund built up so that you never need to rely on credit to get by. What's the interest rate on the car loan? I buy cars for cash, used. I have a '93 Landcruiser, never needs repairs and cost me 0 in interest when I bought it in '96. Probably last as long as me. Now that gas is cheaper, I don't feel so bad about driving it down to the beach.

The target date fund you have, FFKHX is OK. But if you rolled it to an IRA, you could lower your expense ratio from 0.65% to 0.18% with the 2050 Vanguard version. Compare the holdings and performance of the 2. Expenses are something over which you have some control in investing. And they matter in the long run.

Most of all I would encourage you to begin on a course of self-study in the basics of personal finance. Your local library should have a decent selection of books from which to choose. Even if you are not that interested in it, you should know enough that you can come up with a reasonable plan and not get talked out of it or talked into something else. You can easily develop the foundation that will help you to ignore the noise and follow your plan. You don't need 99% of what Wall Street is selling. It's expensive, unsuitable, or stupid. Most investments are designed to profit the brokers, banks, and insurance companies, not you.

Information is more valuable sold than used â€“ Fischer Black

Tue Nov 11, 2014 8:12 pm

JTMAC22New Poster

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Location: Mississippi

Thanks for the help so far, just to clarify a couple things I have 2 credit cards with a total of 4K debt on them, most of that was just accrued on vacation, based on my current payments they should be payed off by Feb 2015. i do have a emergency fund of about 10K put aside should the need arise and my interest rate is 1.9% on my car loan. My new company finally sent out some more information about the new benefits granted it was one sheet of paper and there are scheduled sit down meetings sometime in December, with that said the new company has this to say about the 401K "You will be automatically enrolled in a target date fund based upon your age, and at the deferral percentage you have chosen under your current plan as of December 31, 2014." How are these target date funds determined? Is it based on assuming that you will retire at a given age? And apparently the new company will match 401K based on a rolling 5 qtr average and the companies ROA a minimum of 5% and max of 50%. The profit sharing contributions are 50% my decision of where to invest and the company decides the other 50%, its still a 100% contribution they just get to decide where to invest it i guess. The stock options that we get become vested after 2 years and then become common stock. I guess real question is this should i just roll my current plan into an IRA and start fresh with the new policy, seeing as how this is taking effect in a little over a month with no real information other than email and word of mouth from COO,CFO. Lastly I perused the local library here and about the best thing i noticed for a selection was investing for dummies, do you happen to have a book or two that you would recommend for a newbie? Thanks again for the help and the wishes about veterans day.

Wed Nov 12, 2014 9:47 am

blixetPreferred Member

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Location: Southern California

It is good that you could have the CC debt paid off by Feb. But with your savings you could pay it off immediately and then pay yourself back over the same time period saving payment of the interest. The car loan is at a good rate so no hurry there since you can use the leverage of the loan for your investing.

If you stay with the Target Date approach to investing, how they pick which fund to stick you in probably doesn't matter much. They may assume some age like 65 for retirement and find the closest fund that matches. The funds that are a long ways off are probably at the same place on the glide path so the allocations at least in the early stages will likely be the same. In any event, you'll have the ability to switch if you want.

Usually, it is preferable to roll your old plan to an IRA to gain more control of your funds and have better investing options available. Unless there is something desirable in the new fund that you can't get elsewhere the IRA is probably more advantageous. For some, access to a stable value fund might be an example. At your age, you might be indifferent to such a low risk option, depending on your circumstances.

Here are a few books on investing that will definitely help get you better informed:

As far as owning your company's stock goes, once the options exercise it is usually preferable to diversify away the risk of being concentrated in one company, especially since your income is also dependent on the same company. If you want to hold the stock, consider keeping the allocation to it at less than 5% of your total portfolio. You won't get rich this way if it goes through the roof, but you will protect yourself from calamity if the worst happens.

Information is more valuable sold than used â€“ Fischer Black

Wed Nov 12, 2014 3:02 pm

dozuluPreferred Member

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Location: Eastern Oregon

You are WAY AHEAD of most other people because you are working to have control over your money. Many people, perhaps most people, refuse to engage their finances.

One of the things that I have found useful is developing the long horizon on my investments. Some things go up and down, almost like a cycle. If I let the daily market totals determine my okayness, I fear that I would never be peaceful. So since you are looking at 2050 target dates, try to not let the numbers this day, this week, this month drive you into emotional (fear, greed) money moves.

Since you are stable and focused on your future, you will learn everything needed to succeed with your finances. One of the hardest problems is finding kindred spirits to talk issues with. This forum is a gold mine of financial advice.

Keep asking questions. Good luck!

Fri Nov 20, 2015 1:24 am

louiefriasMember

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Location: Las Vegas, NV

If you haven't already...

Buy and read "Tax Free Retirement" by Patrick Kelly.

Wed Oct 05, 2016 9:14 pm

oldguySenior Member

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Dang Louie, where are you finding all of these old 2 or 3 year-old posts? Those posters might be old millionaires by now, lol.

Wed Oct 05, 2016 10:30 pm

louiefriasMember

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Right? LOL...

As you and I both know, most people do nothing. Even years later. Which is why most Americans remain frustrated...all I can do is hope to catch as many as possible.

Thank you for all your contributions as well!

quote:Originally posted by oldguyDang Louie, where are you finding all of these old 2 or 3 year-old posts? Those posters might be old millionaires by now, lol.